This film picks up from where the original Blue Lagoon left off. Richard is the child of Richard and Emmeline Lestrange of the original film, who both are revealed to be dead at the beginning and are buried at sea. Mrs. Sarah Hargrave, a beautiful widow, and two young children are cast off from the ship they are travelling on. After days afloat, a sailor tries to kill the children, but Sarah kills him, feeding him to the deep. They later arrive and are stranded on a beautiful tropical island in the South Pacific. Sarah tries to raise them to be civilized, but soon gives up, as the orphaned boy Richard was born and raised by young lovers on this same island, and he influences the widow's daughter Lilli.
They grow up, and Sarah educates them from the Bible, as well as from her own knowledge, including the facts of life. She cautiously demands the children never to go to the forbidden side of the island. When Richard and Lilli are about eight, she dies, leaving them to finish raising themselves. Together, they survive solely on their resourcefulness, and the bounty of their remote paradise. Years later, both Richard Lestrange and Lilli Hargrave grow into tall, strong, and beautiful young adults. This film carries a moral message about the true meaning of civilized society, since Richard and Lilli have exposed themselves to its danger and corruption: respect and love each other, keep the friendship alive, avoid the actions leading to conflict, and live harmoniously with nature.